While considering the option of buying a car, one might see that the cost involved is quite high. On the other hand if they were to lease the car, it might work out cheaper and better in the long run. Even though buying a car is an investment, it will be expensive, for those who don’t have that kind of spending capacity. The payments to be made on a monthly basis will also be much lower, which is what draws a lot of people towards leasing out a car for anywhere from 1year to 3years.
Advantages and Disadvantages:
The user of the car pays for whatever portion of the car they are using and not for the entire car. Unlike in case of purchasing a car, a big amount does not go into the car, and your finances don’t get locked up.
The person who has taken the lease knows that they own the car for the duration they have picked up for. They do not have to worry about the vehicle getting repossessed since they are unable to meet the monthly payments. But on the other hand, when it is time to return the car, and close the lease, the fee levied is quite high. This does differs from company but there is a return fee charged.
Leasing is where the person signs a contract saying I wish to lease out the car for x number of years, and pays a certain sum as down payment, and rest on a monthly basis. It is kind of similar to renting, except the rates when renting out vehicles for long durations will kill the person, draining out their savings. You will also take on an extended insurance, which might cost more than what it would have you bought a car. Also at times certain repairs will not be covered by the leasing company and so you will end up dipping into your savings further more. Top it all, you will have to take care of the car more than you would of your own car, all this will take a toll on your finances and stress levels.
The car dealers offer a good rate to the people who are interested in leasing out the car, and give them lower rates as well. This is to encourage more people to lease out vehicles. While purchasing the car, one need to put in a huge chunk as advance payment and the break ups are also quite high. So if they are sure of their income, only then can they be confident to meet these payments.
The drawback of leasing is that one needs to have a good credit rating to be eligible for leasing. If they have not paid bills, or have a lot of bad credit in their statement, it would work against them. Therefore, it is essential to be aware of the terms of leasing before going in for the option.
So, think it through before signing on a lease document.